Big Bank CEO: No Dividend Increase in 2014

If you're a shareholder of BB&T and were hoping it'd raise its dividend next year, I have bad news for you. According to its CEO Kelly King, the mid-Atlantic-based bank isn't planning on doing anything of the sort.

"There is still this downward pressure ... in terms of dividend payout rates," Kelly said on the company's most recent earnings call. He then went on to explain that it will be "challenging to raise dividends at a high level because ... we already have a very high level in terms of payout and dividend yield."

What Kelly is referring to when he mentions "downward pressure" is the Federal Reserve-administered comprehensive capital analysis and review process, or CCAR, which gives the central bank an up-or-down vote on a bank's capital plans.

In this year's CCAR instructions, the Fed didn't mince words, saying that "requests that imply common dividend payout ratios above 30% of projected after-tax net income available to common shareholders in either the BHC baseline or supervisory baseline will receive particularly close scrutiny."

Herein lies BB&T's dilemma.

As you can see in the chart above, it distributed nearly 54% of its earnings to shareholders over the last 12 months. This is more than any of its close competitors. For instance, JPMorgan Chase, Wells Fargo, and U.S. Bancorp all sport payout ratios in and around the 30% threshold.

The net result is that, for better or for worse, BB&T will be left with share buybacks as the only means to return capital to shareholders.

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John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of JPMorgan Chase and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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